Blog Entry

Nov 3
2015 

Cloud Licensing for Customer Success

At this year’s LicensingLive! event in Cupertino, CA, I spoke about the importance of Customer Success Programs, what they involve, and what businesses hope to achieve with them. The success of a software company is often measured in terms of how well it engages its customers. After all, a business without an active user base is like a bird without wings – it simply won’t fly. I say “active” because with the advent of SaaS offerings, the industry has shifted from selling perpetual licenses, which take a set-it-and-forget-it approach, to subscription and usage-based models, which rely on actual consumption among other parameters. This shift has led to a greater dependency on customer retention, and businesses are rightfully looking at ways of ensuring a positive customer experience that keeps them coming back.

The churn challenge
Another development we’re seeing is the inclusion of on-premise solutions that are offered on a termed, subscription, or usage basis. While these solutions are a fantastic way for software companies to tap into new markets and reap new revenue opportunities, they come with the same risks as SaaS offerings. The biggest challenge here is preventing churn, and we need only look at the cost of acquiring new customers versus that of retaining existing customers to see why. According to consulting firmLee Resources International, attracting new customers will cost your company five times more than maintaining an existing one. Indeed, for companies that have adopted usage and subscription-based models, losing a customer early on in the game has a far greater impact on revenue. Unlike perpetual licenses that allow for up-front revenue recognition, subscriptions bring in the bucks on a recurring basis, and so, depend almost entirely on customer retention. If a customer walks away in year two or three, a company stands to lose far more, both in terms of cash flow and revenue, than they would with a perpetual license. However, if they manage to retain that customer, the overall revenue-cash flow benefit is even greater in the long run. Management consulting firm Bain & Company concurs: a mere 5% increase in customer retention can boost a company’s profitability by 75%.

Would you like fries with that?
In addition to reducing or eliminating churn, a Customer Success Program is intended to help companies proactively identify sales opportunities. Having a better understanding of your customer’s business and how/why they are using your service offerings makes it easier to recognize and act upon potential upsell and cross-sell opportunities. This in turn allows you to add new features to your existing offerings, and expand your portfolio of products for use in other projects.

Elements of customer success
A Customer Success Program starts by proactively introducing customers to the solutions most relevant to their needs. The customer experience is determined in part by the usability of the licensing solution, and in part by the ease of working with you as a vendor. Having an intimate knowledge of your customers’ business not only makes it easier to nurture customer relationships, it also helps you spot growth opportunities and red flags. It should be noted, however, that while Customer Success Programs can be escalation points for Technical Support, that is not their primary function.

Observe usage trends
The most effective way to retain customers is through proactive engagement, so it’s imperative that you have a good understanding of their business to be able to anticipate their licensing needs. How they consume your service offerings, if at all, can reveal a great deal about a customer specifically and the market in general. Usage tracking should give you a clear indication of how to optimize your offerings and fill any gaps in the market.

For this you will need to implement a cloud-based licensing and enforcement solution like Sentinel Cloud. The usage insight it provides is invaluable as it shows whether your SaaS or on-premise offerings are being used as intended, and which features are most and least popular among users. It also allows you to monitor customer usage for quantity and frequency, making it possible to proactively increase and improve the ways in which your offerings are consumed.

Supplemental to licensing is entitlement management. A system such as Sentinel EMS brings unprecedented visibility to your back office. Its 360-degree customer view shows you which entitlements of those deployed have been activated, and which products are going unused and underused. At the same time, this level of insight allows you to identify end users for promotional and tech outreach purposes.

Both Sentinel solutions enable you to leverage the cloud’s full potential, giving you access to a wealth of entitlement and usage data, collected in real time. This data serves not only to inform your strategic decision-making, but also to automate the entire proactive marketing and sales operations lifecycle, handing you Customer Success on a silver platter.